Ulbrichtian Communism Part 1: Economy of the Iron Fist


The conflict between the German Democratic Republic and the Federal Republic of Germany represented the epicenter of the Cold War in the 20th century.  After WWII, Germany was split in Berlin into two separate states by the occupying powers (Britain, the United States, France and the Soviet Union) based upon an agreements settled in the city of Potsdam in Brandenburg.  Sovietization of the Eastern sector of Germany (controlled by the Soviet Union) and the imposition of an oppressive Communist regime under the leadership of Walter Ulbricht led to mass exoduses of Germans living in the East to the Western sector which was already being liberalized economically and domestically by the Allied powers into a predominantly capitalist state.  The construction of the Berlin Wall in August of 1961 to stop this mass population bleeding would permanently separate Germany along ideological lines and would be the center of vigorous competition in the economic sector over the next 28 years to prove which of the two German states proved dominant and superior.

The Federal Republic of Germany in the West (FRG) saw its economy boom to become one of the most powerful economic players in the international market, bolstered by a strengthening national currency (the Deutsche Mark) and an explosion of new jobs and businesses.  The German Democratic Republic (GDR), which allied with the Soviet Union and other communist member states within the Warsaw Pact, would struggle throughout its existence to establish legitimacy for its people, bolster forth sustainable economic growth, improve the value of its national currency, improve the standard of living, and govern effectively without the use of oppressive force.  The GDR would prove to be the catalyst of the communist experiment in Eastern Europe, and its implementation of vice-gripping domestic, public, regulatory and economic policies made it seem like a “watered down” version of the tyrannical German state that was dismantled earlier in 1945.  If tyranny didn’t work then under the Nazi regime, one could speculate how anyone could think a communist variant of tyranny would prove any better for the German people.  The virulent communism of the governing political party (the SED) led by demagogues such as Walter Ulbricht and Erich Honecker would not only bankrupt the GDR, but would force the citizens of the GDR to be subjected to numerous forms of political oppression such as imprisonment, mass government surveillance, and hundreds of executions at the Berlin Wall.

Mankind, by our Creator’s design, was created to be free and autonomous, and any attempt by a “ruling few” to exact absolute power and tyranny over others, eventually leads to disaster. The GDR is an example of this inalienable truth and how unchecked hubris prevents humanity from learning from the failings of the tyrannical state (e.g. today’s millennials’ obsession with communism).  The leaders of the GDR, unlike the FRG that saw utility in liberalization, committed one of the greatest failures of the 20th century: They traded one form of tyranny for another.  It is an egregious offense against historical academia that millennials today en masse don’t know what took place in the German state following 1945, specifically with regards to its communist variant.  It is my fear that this ignorance to history will eventually lead to the repeating of history, and today’s generation is proving itself to be just a “stone’s throw away” from falling into the same trap of tyranny’s cycle of hubris.  It is my hope that this analysis would provide some light on the failures of communism and provide some pretext for the debate going forward.  Let us begin.

The Great Divide:

As mentioned briefly in my introduction, there is no question that the years after World War II presented some of the most unique challenges ever to face Europe, let alone the now divided state of Germany.  As Germany was partitioned in half between the Western Allies and the Eastern Communist bloc governed by the Soviet Union, an extended period of fierce competition between the West and the East would ensue until the German state re-unified in 1989.  As West Germany adopted the capitalistic principles of a free-market economy to stimulate economic growth, its counterpart, which lay in the East, stood against what they saw as “Western imperialism” in favor of an economy governed under the iron-hand of communist rule by the state and collectivized industry and production taken from the doctrine of Stalinism.  Led by the newly installed communist dictator Walter Ulbricht in the East and Chancellor Konrad Adenauer in the West, the struggle for how Germany would re-unify depended on which society proved to be superior in terms of growth and development.

As history shows us, it was Ulbricht’s Communism, mirroring the political and economic structure of the Soviet Union, that would prove to be the undoing of the GDR economy and its society, and would permanently cripple it in its overarching goal of the pursuit to overtake the West.  Under the Ulbricht regime between 1950-1971, the voracious drive to bring all production, economic, agrarian, industrial and political aspects of the GDR under the rule and oversight of the state completely exacerbated the wartime-destruction that emerged post-World War II that had already left the GDR without 50% of its original industrial capacity.

Starting From Ground Zero:

East Germany already began its post-World War II economic recovery paying reparations to the Soviet Union in the form of machines and industrial equipment under occupation rule, causing much of the private property in the East to be confiscated by the SED controlled government, which then monopolized them into state-run industries that wiped out massive portions of the private sector economy in the GDR.  Owners of private property found themselves competing against government-run enterprises under unfair terms, leading them to have to sell most of their products at prices fixed by the government and being forced to pay incredibly burdensome taxes.  This was especially the case for many of the individual farmers that had to cope with the new Communist policies that collectivized the economy.  According to Henry Turner, by 1952, “…the private sector of the economy shrunk to the point where over three-quarters of the industrial workers in the GDR were employed by state-run enterprises”.  Coupled with the effects of reparations to the Soviet Union and the forced repression of private owned industry in pursuit of a collectivized economy by the Communist regime, the economy became severely crippled and was almost completely dependent upon the Soviet Union for its stability and survival.

If the ultimate goal of the GDR was to prove its superiority and higher economic and political appeal to the citizens of West Germany (via magnet theory), the events that transpired between 1946 and 1961 did anything but assist Ulbricht and the Politburo in reaching this ideal.  In fact, Walter Ulbricht’s bold promises to overtake the West never came close to fruition.  For example, according to historical analyst Peter Sperlich, Walter Ulbricht promised that by the year 1961, the citizens of the GDR would have a higher living standard than the FRG and that the GDR would eventually overtake the FRG in terms of per capita consumption of consumer goods and food.  However, this would just prove to be one of the many empty promises of Ulbricht’s Communism.  By 1960, the GDR failed to achieve higher quality products, a higher quality standard of living, and even failed to develop in their pure socialist policies such as worker-welfare.

The Exodus and the Effects of State Monopolies:

These poor economic and social developments were further exacerbated by mass exoduses of agrarian farmers and industrial workers (many of whom were of working age and had previously owned private land, property and businesses).  From a population that began with approximately 19 million people following World War II, the exodus that took place in years following would see hundreds of thousands of East German workers and their families fleeing to the FRG as economic, domestic and political policies in the GDR became more repressive.  This would prove to be a continuous and detrimental “Achilles’ heel” for the GDR as it struggled to attempt
to gain a “leg up” on their counterparts in the West, which had already diversified their economy by initiating free-trade policies with their Western allies and domestic economic policies that encouraged private industry and small business.

The decrease in avid competition in the market via collectivization led to an incredible lax in
labor productivity.  GDR industrial workers were negligent, uninterested, frequently drunk and barely put in a full-day’s work.  However, historians like Sperlich concluded that this development wasn’t the fault of the workers themselves but rather of the reality of consistent shortages in raw materials and frequent breakdowns of machinery that halted production. Idleness became part of the definition of the GDR workforce, and this was also largely attributable to the vast scarcity in nearly every category of consumer goods on the market.  Sperlich makes an important analogy, “If, per chance, a department store received a shipment of lightbulbs or a grocery store a crate of lemons, these would long be gone when the work shift came to a close.”  Henceforth, workers would have to leave mid-shift just to purchase everyday commodities and food products. These developments came directly amidst the First Five-Year Plan of the Third Party Congress, which was established for the years 1951-1955 on the premise of Stalinism, its Communist orthodoxic doctrine for economic development.  The ultimate goal of the plan was to achieve a production level that doubled production in the mid-1930s via state-run enterprises, but the vice-gripping of production capabilities and the elimination of nearly all private-sector investment would prove to serve as the coup de grace against any aspiration to develop at a consistent pace while catching up to the economic boom that pervaded throughout the FRG in the West.

The 1953 Uprising and the Soviet Economic Relaxation Mandate

The economic degradation of the GDR soon began to stir backlash in the populace.  The East German Uprising in June 17, 1953 provided perhaps one of the most violent rebukes against Ulbricht’s Communism and the atrocious working conditions and outrageous production demands made by the Communist regime.  According to the New York Times, on June 16, 1953 (one day before the uprising) the East German Council of Ministers raised the production and construction quotas by at least 10 percent, which then sparked immediate outrage in the East.  300,000 workers would take to the streets demanding a change to the new and oppressive policies.  The East German Police and Soviet troops responded lethally, slaughtering between 25 and 300 of the protesters.  Although the uprising itself was quelled, and many of its organizers were either executed or imprisoned, the event would soon become a harbinger for what was to come as East Germans continued to look to West Germany as a land of better opportunities and stability. Between the period between 1949-1961, over 2 million East Germans in total fled to West Germany, many of whom were the very workers the SED regime desperately needed to meet quotas for the state.

Yet for all its communist prowess, the Soviet Union (the staple of statecraft Communism) itself saw the early dangers of rapid economic transition into Communism in the GDR and how it was greatly contributing to the lax in production and mass exodus of the worker population into West Berlin and West Germany, let alone contributing to severe worker dissatisfaction.  To that end, The Communist leadership in the Soviet Union issued a directive to the Ulbricbht regime called The New Course, which sought to relax the zealous Communist initiatives of Ulbricbht and the SED regime.  According to George Washington University Professor Hope Harrison, “Noting that many farmers, engineers, technicians, scientific workers, teachers and youth were leaving, the MID officials called for changes in SED policies…”  These changes in policies would take place in the form of a halt on the collectivization of the agrarian sector of the economy, a greater focus on the quality and variety of consumer good production and a cessation of the confiscation of goods from GDR farmers who weren’t able to meet their production quotas for the state.

The stability of the GDR was already falling apart before it began, and it was quite telling that the Soviets were so eager to roll back the very policies that they had promoted when they established the GDR in 1949. Was blind faith in purist communism not as virtuous as the leaders of the communist Politburo in the Soviet Union had so religiously advocated in the past?  The increasing distaste for Ulbricht’s purism and his rapid push for communist control over every aspect of the market seems to suggest this.  In the sequel to this piece, we shall further explore the failures of communist economy in the GDR, as well as examine some arguments made by analyst Jean Edward Smith in defense of Ulbricht’s communism.  Finally, we will conclude this work with brief analysis of the policies enacted under Erich Honecker after Ulbricht’s ousting from office in 1971.

Joey Vazquez III


Gregory, Paul, and Gert Leptin. “Similar Societies under Differing Economic Systems: The Case of the two Germanys.” Soviet Studies 29, no. 4 (1977): 519-42. http://www.jstor.org.proxygw.wrlc.org/stable/150534.

Turner Jr., Henry. 1992. Germany from Partition to Reunification. New Haven and London: Yale University Press.

Sperlich, Peter. 2006. Oppression and Scarcity: The History of the Institutional Structure of the Marxist-Leninist Government of East Germany and Some Perspectives on Life in a Socialist System. Westport: Greenwood Publishing Group.

Engelhard, Stephanie. (2010). “Constructing Socialism in East Germany: An Early History of the GDR; 1945-1955.” 2009-2010 Penn Humanities Forum on Connections.

Bernstein, Richard “In East Germany, 1953 Uprising is Remembered”. The New York Times, June. 16, 2003.

2017. “Berlin Wall Fast Facts.” CNN. August 20. Accessed October 5, 2017. http://www.cnn.com/2013/09/15/world/europe/berlin-wall-fast-facts/index.html.

Harrison, Hope. 2005. Soviet-East German Relations, 1953-1961: Driving the Soviets Up the Wall. Princeton: Princeton University Press.

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